Kenshin Thoughts Posts

As I started having a conversation with international VCs and CVCs, I noticed there is a big difference in the way they ask questions when they meet a startup founder for the first time.

Domestics VCs or Japanese investors always start a conversation by asking a question like what kind of problem the startup is trying to solve, a product or service the startup is offering, and traction the startup is having at the moment. In short, they want to know a product/market fit and potential market size. Simple.

In contrast, those who are based in North America, the Middle East, SE Asia, and China tend to start a conversation by asking how co-founders meet, the background of each founding member, and a history of the company formation. Their focus is on the people, not on the product. This applies to a startup beyond series A stage that is ready to scale its business.

When I talk to domestics VCs, I never pay too much attention to talking about the founding member’s background because I’m never asked to do so. The slide about the founding members always comes at the end in the pitch deck and I often have to skip it by running out of time. However, I was recently advised to bring that slide to the beginning when I talk to international VCs because that’s what they want to know first.

Why the difference? My understanding is that the belief of the latter group of people is the best investment return comes from a strong founding team, not a strong product. This makes sense given that the startup might have multiple products or businesses in the future. Some might work out okay while others might not.

The startup can survive as long as there is a strong founding team even if all products fail. They can pivot or make adjustments according to changes in the market, and release a new product along the way. If the startup has a strong product but no strong founding team, then it will have to face serious trouble when a big company enters the same market or the product is not selling well anymore.

Maybe this difference is partly due to the fact that there are more serial entrepreneurs internationally than in Japan. VCs need to justify if the founder is a serial entrepreneur or not because that fact alone can change the success ratio of their investment a lot.

Not sure if I’m considered serial enough, but I like the way they treat entrepreneurs. I really encourage Japanese investors to take a hard look at the founder’s background and put more weight on the uniqueness of the founding team.

I’m writing this blog post at my hometown in Shiga since we are in the middle of a long holiday (golden week) here in Japan. Just like every other entrepreneur, I’m spending most of my time reading books, learning new things and thinking about what our startup should do in the near future.

Among the books I’ve read, Super Genba caught my eyes. Although this book was written quite some time ago, I was advised to read it by one of our stakeholders so I did it.

What the book insists throughout all chapters is very straight forward. The company that can create a system to manage customer touchpoints and turn them into cash quickly wins.

Apple is a good example. The company manages customers touchpoints by operating its retail store worldwide, and its inventory period is less than 5 days. In other words, Apple can pull hundreds of dollars from your wallet and put them into its bank account very quickly once you decide to purchase any Apple products.

All Apple devices connect to iCloud every couple of days to send the usage data of products whether you like it or not. This is their way of understanding what the customer wants. There is no middleman in between.

A bad example is a typical Japanese company in which its sales activity heavily relies on middlemen like resellers and distributors, and its inventory period easily exceeds 60 days. Again, in other words, they don’t know who their customers are and what the customers really want, and they are paying billions of dollars to keep these inventories. There is no way for them to win against the company like Apple.

We are now living the age of the cloud where creating a direct customer touchpoint is easier than ever. If your competitors are understanding the customers better than you do, then you will lose. It doesn’t matter how good your product or service is. It all about managing customer touchpoints and how fast you can turn them into cash.

I strongly recommend this book to any CEO and entrepreneur running a company in Japan.

Every time I see this kind of AI-in-retail application, I somehow feel sad. It’s because of the introduction of retail AI is often designed to one particular goal, which is to encourage consumers to buy more foods and goods by analyzing the buying behavior and removing whatever obstacles between the seller and buyer.

To me, this is totally against a food crisis which we will face in the near future. Even worse, more food and good consumption lead to more logistics that will cause more gas consumption. Electric trucks are coming, but it will take decades for every logistic company to adopt them.

In the ideal world, all foods and goods will be produced nearby a consumer neighborhood. Thanks to the innovation happening in plat factory and 3D printing, we are seeing some of them becoming reality. I’m a big fan of startups that are tackling a non-animal based protein problem.

AI should be used to foster the latter, not to drive the current consumption heavy economy. In the long run, the companies that use AI to create a sustainable economy will gain trust from consumers and eventually win.

The Japanese government finally announced its policy for AI talent education. To me, this is just another instant reaction without thinking too much that we’ve seen many times in the past.

In 1987, the government said we need to educate software engineers because there will be a shortage of 40,000 system engineers and programmers by 2000. In order to solve this problem, the government launched a plan to train 16,000 teachers who would be responsible for teaching programming at junior high school.

Did Japan become a top country in this domain? Nope. India, China, Vietnam, and the Philippines are doing a much better job right now.

In 2016, the government said we need to educate security experts who can prevent the country from getting cyber attacks because there will be a shortage of 200,000 security experts. Again, Israel and Chine are doing a much better job. Do you see the pattern here?

When the government says ‘educate’, it means they are trying to create more users, not inventors. Creating more AI users, particularly people who can use deep leaning, do not make Japan the leading country in AI. In fact, it’s forcing people to become consumers of AI, not producers. There is a huge gap between the two.

Look at Canada. Why does this country host so many scientists who contributed to fundamental research in AI? To name a few, Yoshua Bengio, Geoffrey Hinton, Yann LeCun, and Robert Tibshirani (a core contributor of LASSO which my startup uses it a lot), they are either born, lived, studied or worked in Canada.

If Japan were serious about being the leading country in AI, then all investments should be made toward creating more researchers in statistics, mathematics, machine learning, and AI fields. I strongly feel sorry for our children who are obligated to go through this ridiculous education policy driven by the government.

First off, I’m not exactly a big fan of Slack. I feel like I’m forced to find a tiny comment within a thousand lines of source code written by someone else. If you are a software developer, you know what I mean.

That feeling is coming from the fact that Slack is mainly designed for a software developer and it’s a very text-heavy product. Slack is an awesome communication tool when you use it properly in your organization. But at the same time, it can kill your time as CEO.

As a company gets bigger, you as a CEO get invited into so many Slack (or Facebook, WhatsApp, whatever messaging app) channels that you should not be part of. Even though I’m making my position crystal clear, I keep getting such an invitation from the people inside and outside the company all the time. When that happens, I simply share my above blog post and quit the channel with a little apology.

My ultimate goal is to narrow down my Slack channels into just two. They are not #general and #random channels, where you are a member by default. I’m talking about #whatceoisthinking and #troubleshooting channels.

The former is what the channel name says. It’s a place for the CEO to share his/her thoughts company-wide. The latter is the place for the employees where they can request a special assistance from the CEO in order to troubleshoot anything that’s preventing their job from getting it done.

Troubleshooting is the privilege of the CEO and not so many CEOs think that way. Let’s take a look at my typical day schedule. I will explain why.

Amongst the tasks listed above, everything except for the last item can be done by other people. You can delegate these tasks to your employees. However, there are types of troubles that can be solved by the CEO only and they range from fixing a relationship between employees to making an apology to a loyal customer.

You as CEO want to troubleshoot anything as early as possible because it gets really messy if you leave it for quite some time. In order to do so, you need a channel to watch out for any potential trouble within the company. This is the reason why you need a dedicated channel for it and you need to be open for feedback from the employees.

Hopefully, one day I can be the CEO who runs his company by dealing with these two channels only.

This is my response to the latest episode from This Week in Startups podcast. The talk was done by Joel Spolsky, a founder of Stack Overflow and Trello. The latter was acquired by Atlassian for $425 million as we all know.

During this 50 minutes long conversation, I particularly liked the below statement.

“I rarely worked more than 8 hours a day in my entire career because I figured if I’m working more than 8 hours a day then I have failed to delegate something.”

A delegation, in other words, letting someone else do a job for you is one of the fundamental tasks that a CEO needs to do. If a CEO can leave the office before anyone, it is a good sign that the CEO is actually doing the right job.

Instead, the CEO should spend 100% of his time for hiring people smarter than him and making sure a company doesn’t run out of money. Telling a vision and defining a long-term goal is another thing only the CEO can do.

If you are a CEO working more than 8 hours a day or doing jobs other than ones stated above, then you are not doing the right job. You need to hire people to whom you can delegate a job. You need to finance in order to hire these people. You need to tell them a vision and a long-term goal so they don’t lose their way.

I’m hugely concerned about the recent moves made by the Japanese government and its direction trying to introduce more textbooks into elementary school.

Now, there are new programming and English textbooks. The amount of pages in the entire textbooks is increased by 10% and the children in elementary school have to deal with them for the same amount of time as before.

This kind of bombing does not help English education in Japan get better. Please stop.

Japan has a reputation for bad English education. Japan is one of the very few countries in Asia where people from outside have serious difficulties communicating in English. It’s nothing but shame on us.

What we need is not a textbook nor proper grammar even. Why not adopt iPad and online English lessons? We need to get rid of our common sense that teachers must have a physical presence in the classroom.

The number of good English speaking teachers and the number of schools in Japan simply don’t match. There are too few GOOD teachers and too many audiences. We must adopt new technology rather than keep pouring old fashioned textbooks into the classroom.

As anticipated, TSE (Tokyo Stock Exchange, Inc.) announced its new policy about the companies listed in the 1st section as well as restructuring plan for other 3 sections.

First off, I really like the ideas behind these changes. TSE 1st section has been criticized by foreign investors for so long by the fact that there are simply too many companies listed and very few companies are doing disclosure in English.

To them, the TSE 1st section is a hard-to-choose market and hence wasn’t appealing until now. Plus, there wasn’t a clear set of rules for the companies to be disqualified from the 1st section. Now that a company whose valuation is below $250M and not doing disclosure in English will be disqualified and forced to be out of the 1st section.

It’s not just a matter of IR. It’s a matter of CEO running a public company as well. There has been a clear message made by TSE, saying a CEO needs to communicate with foreign investors with his/her own words.

Apart from the new policy introduced in the 1st section, the other 3 sections will be merged into 2 sections, namely Emerging and Standard. I assume current Mothers and JASDAQ will be merged into one and the 2nd section will remain as it is under a different name.

What I would like to point out here is the existence of TOKYO PRO Market, which is TSE’s 5th section that no one ever knows about. The original inspiration of the TOKYO PRO Market was AIM (Alternative Investment Market) at the London Stock Exchange.

For those who don’t know history of TSE, TOKYO PRO Market was named after AIM and it was called TOKYO AIM back in 2009. Unfortunately, there wasn’t a single company that went public in TOKYO AIM for years. Eventually, TSE decided to change the name to TOKYO PRO Market upon dissolution with the London Stock Exchange in 2012.

To me, a concept of the TOKYO PRO Market is still valid and sounds promising. Japanese startups definitely need this kind of alternative market where only professional investors are allowed to participate. By professional I mean, institutional investors who make a decision based on a company’s long term vision and future value created by the company. Not ones who buy and sell a stock based on short term observation.

We still don’t know the exact criteria about the new Emerging and Standard sections. However, there is a rumor saying the hurdles for these two sections will be raised too. I’m hoping TSE will do something about TOKYO PRO Market so that startups can choose a proper market according to the nature of their business when going public.

If a startup is B2C, then what used to be Mothers where a lot of individual buyers/sellers participate might be appropriate. If a startup is B2B, biotech or R&D oriented, then TOKYO PRO Market might be the right one.

The biggest problem about TOKYO PRO Market is there is no unicorn listed there and the amount of transactions is nearly zero. It’s a chicken and egg problem, but it can be solved. We need to create demand first so having a unicorn going public in that market is crucial.

I’m writing this blog post in Hsinchu, Taiwan. I’m here to attend the RISC-V Workshop, which is a 2-day event where people in the community come together and share their latest activities regarding RISC-V development.

For those who don’t know, RISC-V is an open-source hardware instruction set architecture (ISA) based on reduced instruction set computer (RISC) principles. Because it’s open source, everyone can make their own RISC based processor without paying a royalty to anyone.

There were so many things I learned from not only the speakers but also the people I’ve met during a networking session. Among them, I want to bring up this one in order to highlight the biggest misconception about this new ISA.

“RISC-V is not free, but it’s open.”

RISC-V is free in the sense that it’s a royalty-free architecture, but it does not mean cost free. In fact, RISC-V could be more costly than the established architectures like ARM since there aren’t enough tools out there in the market yet and you will have to create them by yourself at least for the moment.

However, it’s completely open in the sense that anyone can refer to its specification, download the RTL, run it on FPGA, make necessary changes and even propose changes to the RISC-V Foundation if they should be part of the specification. There are some physical boards available so that you can run your code on actual RISC-V processor if performance is a crucial factor.

I’m happy to see the workshop is taking place here in Taiwan. At the same time, I’m a bit disappointed by the fact this whole movement is happening without much involvement from Japanese companies.

This reminds me of the days when Linux just came out. Japanese companies insisted to keep using a proprietary OS like Solaris and WindowsNT because they could get an enterprise level support from vendors. Now that we have RedHat and no one argues the cost-effectiveness of Linux today.

In exchange for not being part of early Linux adoption, Japan lost its position as an innovator in the Linux community. Japan could make the first Linux based smartphone. Japan could be the major PaaS player built with Linux. Now, these seats are taken by Android and AWS respectively.

I always tell my team, “the longer you delay getting feedback, the more risk you will have to deal in the future.” This applies to the release of new products and services to potential customers as well as the understanding of game-changing things like RISC-V.

Right now, the best way to get real feedback and minimize the risk is to listen to the people in a community and become an early adopter by ourselves. I’m hoping Japan won’t miss this opportunity and make the same mistake twice.

February and March are the busiest months for IR, CFO, and CEO since a fiscal year ends at the end of December for many Japanese companies and they publish their annual report during the following February and March.

I try to read a relevant company’s report as much as I can. In fact, I enjoy reading it a lot. It shows where the company was and where the company is heading in the future. While I was reading it, I stumbled upon a quite interesting comment from the CEO who runs a big Japanese public company.

He said that people who buy a stock just because a company pays dividends are not looking at the core value of the company. According to his theory, these people are willing to make extra money by holding a stock that yields dividends and not willing to re-invest into a company that paid the dividends. That was the reason why his company never paid dividends.

I’m not sure if he really means it, but that’s how it was said during the briefing. Assuming it’s true, I thought this is a very self-oriented way of looking at the stock market.

Every CEO who runs a public company needs to ask himself/herself this question: “Where is this money coming from?” People are buying your company’s stock because they have extra money to spend, and that extra money might come from the dividends paid by other companies.

If your company doesn’t pay dividends, then there is less money going back to stockholders. Hence, there is less money going to other public companies because these stockholders do not have extra money to spend. Simple.

If all CEOs start to think like that, it means the beginning of the market shrink. The amount of money floating within the market becomes less and less over time. You need to give first before you get.

It’s almost irony to see CEOs whose company doesn’t pay dividends are the ones criticizing difficulty of raising money from the stock market. These CEOs say like buying the power of people is weakening or there is an economic winter making stockholder not to buy anything.

Well, think again. That’s because your company is not paying dividends.